ObamaCare: feel the churn

22 Jan 2014

Today’s big story about retail giant Target dropping insurance coverage for its part-time employees and dumping them into the ObamaCare exchanges (good luck with that, kids!) highlights two of the worst features of ObamaCare (or two of its best features, if you’re part of the Cloward-Piven “overload the system to impose socialism” crowd.)

First, it replaces private commerce with government controls and taxpayer subsidies. Target had a policy that 10 percent of its part-time workforce – over 36,000 employees – bought voluntarily. Now they’re going to become wards of the taxpayer, and most of the remaining 90 percent will be forced to join them, thanks to the individual mandate tax/penalty. They’ll buy hideously expensive policies, with premiums pumped up by mandated benefits, many of which the buyers will find extravagant or useless, such as the infamous mandated maternity benefits for men. They could never afford to pay those titanic premiums, but the taxpaying chumps of American will eat most of the cost for them.

In other words, these people will go from being a cost on Target’s profit-and-loss statement, to becoming 36,000 living pipelines from the public treasury into the pockets of insurance companies. When we talk about young and healthy people forced to pay high premiums to keep ObamaCare solvent, we’re really talking about taxpayers pouring money into the insurance industry, at the direction of their senior partners in government, who will use the power of the individual mandate to compel people to participate. That’s why the insurance industry got in bed with Obama and the Democrats.

But even that taxpayer pipeline might not flow freely enough to make the scheme work, which brings us to the second big ObamaCare failure illuminated by the Target story: most of the painfully small customer base for ObamaCare comes from people who already had insurance before.

Obama spent a trillion dollars, trashed the Constitution, and hijacked the insurance industry to help the ever-shifting millions in the Uninsured-American community get coverage. (The number changes so much from speech to speech because Democrats keep running afoul of the highly inconvenient truth that a sizable portion of the Uninsured-American community are also members of the Undocumented-American community.) But as ObamaCare unfolds, it’s increasingly clear that not many of the previously uninsured are signing up, even though they are virtually the only group for which “Affordable” Care Act plans are actually a reasonable value. Most of the ObamaCare sign-ups are “churn,” as people with private plans – like those Target employees – learn the hard way that Obama was lying when he swore they would be able to keep them.

This came up in a CNBC story about Aetna CEO Mark Bertolini fretting that “ObamaCare has failed to attract the uninsured,” which means when insurance companies submit their ACA rates for 2015, they might have to jack premiums up even higher, which of course will depress new enrollments even further: the fabled ObamaCare Death Spiral.

“Are they going to be double-digit [increases] or are we going to get beat up because they’re double-digit or are we just going to have to pull out of the program?” Bertolini asked in a “Squawk Box” interview from the World Economic Forum in Davos, Switzerland. “Those questions can’t be answered until we see the population we have today. And we really don’t have a good view on that.”

He said that so far, Obamacare has just shifted people who were insured in the individual market to the public exchanges where they could get a better deal on a subsidy for coverage. “We see only 11 percent of the population is actually people that were firmly uninsured that are now insured. So [it] didn’t really eat into the uninsured population.”

For Obamacare to work better, it needs more flexibility and choice of insurance programs, Bertolini said. “We need to make it a lot more simpler for people. There needs to be more choice. When you get more choice, you make it more of a market and you get more people in the program.”

What’s interesting about this complaint from a knowledgeable industry insider is that it suggests they were really counting on those Constitution-shredding tax/penalties to force a large number of new customers into their hands, compelling people who used to take a pass on buying insurance to get into the game. Obama and his team of central-planning stooges may not understand the first thing about how the insurance industry (or any other industry, for that matter) functions, but Aetna’s CEO certainly does. And he doesn’t think “churn” from destroyed private plans into the ObamaCare exchanges is going to keep his business model floating. He thinks the ACA plans are so unappealing that not even the first stage or two of the individual mandate, coupled with the promise of taxpayer subsidies, is going to bring enough profitable young healthies into the system.